Government may extend scheme to boost productivity

Budget next month could also offer help for local firms to expand abroad

The Government is considering prolonging a key scheme that encourages businesses to invest in improving productivity, said Minister of State for Trade and Industry Teo Ser Luck yesterday.

Mr Teo also hinted that the upcoming Budget - to be unveiled on Feb 21 - may bring help for local firms to expand overseas, as well as to tackle the challenges they are currently facing.

The Ministry of Finance (MOF) is looking at whether to extend the Productivity and Innovation Credit (PIC) after it expires next year, he said.

He was speaking to reporters at a press briefing to unveil Budget recommendations by the Singapore Business Federation (SBF).

The SBF and other business chambers, as well as several companies and tax experts, have suggested extending and tweaking the popular PIC scheme, which subsidises companies' spending in six areas that improve innovation and productivity.

Extending the PIC is "something the MOF has to consider", Mr Teo said yesterday. But he added that companies also need to feel some urgency in making use of the Government's schemes to raise productivity. "We still need to make quite a leap in order to achieve the (productivity) targets by 2020. So there must be a sense of urgency there," he said.

The Government has said it aims to achieve an average of 2 per cent to 3 per cent productivity growth a year in the decade to 2020. But labour productivity grew just 1.3 per cent in 2011 and shrank 2.6 per cent in 2012, the SBF noted.

Other schemes that might feature in this year's Budget include more support for small and medium-sized enterprises (SMEs) to grow and internationalise, as well as to cope with rising costs and other constraints in the local business environment.

"Sometimes it's not about restructuring, it's about expanding, it's about internationalising for the companies," said Mr Teo.

"Probably what we roll out will be targeted at growth (and) enhancement, we'll also be looking at some of the challenges that the SMEs are facing."

Some of these issues include difficulties in obtaining financing, cash-flow problems, and higher business costs ranging from rentals and transport to wages and compliance with government regulations, the SBF said yesterday.

This has led to a growing number of SMEs being categorised as "high risk" by credit bureau DP Information Group.

In 2012, 43 per cent of SMEs were classified as having an 8 per cent or higher chance of default, up from 39 per cent in 2011, the SBF added.

Its SME Committee also polled 1,014 companies across various sectors of the Singapore economy and found that seven in 10 firms hope Budget 2014 will contain measures to help cushion escalating costs, while half the companies want aid to soften the impact of tighter labour policies.

Some suggested measures include providing more affordable industrial space for firms, co-paying insurance premiums for older Singaporean employees, and facilitating new forms of SME financing such as crowdfunding.

Certain sectors, such as construction and retail, also need extra assistance, for instance, in improving their image to attract local workers, the SBF said.

A separate survey by the Association of Small and Medium Enterprises found that seven in 10 companies aim to expand overseas in the next two years, but have no strategy for doing so. Among their main concerns in expansion is a shortage of funding.

This article was first published in The Straits Times on Jan 15, 2014